I like the Instapundit plan of making colleges cosign for student loans (although I believe I may have come up with it earlier than him). The colleges would figure out in a hurry which individuals and courses of study were not viable lending prospects, and it might even help keep a lid on tuition price increases.

“I see a lot of students who just seem to be using their loans to buy consumer goods.”

Yep. One of my husband’s colleagues had a student who used her student loans to buy a horse. That’s the worst student loan story I’ve ever heard, although the runner up is one I heard on the Dave Ramsey show where a woman ran up $80k in student loans for an unfinished journalism degree and now makes $30k a year doing data entry.

Or even if it isn’t fancy consumer goods, students do pay for basic living expenses with student loans. I have no idea when that happened, but at least when I was a college student, the idea was that you could at least earn enough to pay for living expenses. I realize medical and law students can’t really pull that off (and it can be a stretch in demanding science or engineering programs), but liberal arts students should be able to pay for at least a big chunk of their living expenses, particularly with the sort of job where you can read your copy of Middlemarch when it’s slow. It’s terrible to enter into decade-long bondage to pay for a sofa or a piece of electronics that you’ll want to replace in two years!

I think the psychology of it is that the average human mind really doesn’t have an intuitive grasp of credit. We readily understand money and lack of money, but it’s hard to deal intelligently with credit, because it doesn’t operate by the same rules of scarcity as real money. Until things get really bad, you don’t run out of credit. (I have some close relatives who had their heads quite turned by easy credit after they started a business and the offers started to pour in. They were really excited by getting offered a $50k line of credit, as if it were real money. That was around the time of the dot com crash, and they went through some pretty hard times, but they did survive financially and they never again confused credit with “free money.”)

Amy – That idea of making colleges co-sign seems more attractive the more I think about it. It would seem to act as an automatic screening for college-ready students. (I didn’t know you had the idea first, but great minds think alike!)

I think there is greater awareness of how student loans can be a heavy burden for many years, especially if you never graduate. But I still read threads in CollegeConfidential where a young person will blithely express some relief that he can get afford to attend his dream school, but with the help of “aid” that turns out to be $20-30k of loans per year.

“That idea of making colleges co-sign seems more attractive the more I think about it. It would seem to act as an automatic screening for college-ready students.”

I like the idea of the college having to face up to the fact that this particular incoming student doesn’t have a prayer of being able to repay their loans, given the size of the loans and the course of study they have chosen.

Alternately, the colleges could carry the note. (That might have been my original idea, actually, rather than the Instapundit cosigner idea.)

“But I still read threads in CollegeConfidential where a young person will blithely express some relief that he can get afford to attend his dream school, but with the help of “aid” that turns out to be $20-30k of loans per year.”

Yeah. The Dear Wendy letter I posted here about a week ago was one of those. The young woman wanted to get out from under the thumb of her somewhat controlling parents who were paying 100% of her college, but her solution was that she was going to take out loans. So she’d be exchanging being under her parents’ thumb for four years for being under the lenders’ thumbs for a decade.